'Strengthen BSP, PDIC before quadrupling deposit insurance'
abs-cbnNEWS.com | 10/22/2008 4:04 PM
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An executive director of the Bankers' Association of the Philippines (BAP) on Wednesday said he supports President Arroyo’s proposal to quadruple bank deposit insurance as long as the regulatory environment is also strengthened to avoiding bank failures.
“What I’m saying is that if we increase the insured amount, we better make sure that the regulatory authorities, the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit and Insurance Corporation (PDIC), give them more power in order to discipline the banks so that they can strengthen themselves and in order to avoid any future failure that the government may eventually answer for,” Leonilo Coronel said in an interview on ABS-CBN News Channel’s “On the Scene” newscast.
Executive Secretary Eduardo Ermita announced on Tuesday that the President is pushing for a four-fold increase in bank deposit insurance as part of the government’s measures to boost confidence in the banking system amid the global financial crisis.
A bill to increase bank deposit insurance to P500,000 from P250,000 is pending in Congress but the Cabinet wants to raise the coverage to P1 million.
Coronel recognized the value of the President’s proposition, saying that other countries in Southeast Asia have also increased their deposit insurance. He stressed, however, that the government should make sure that it can afford the quadruple increase.
“The depositors would not have any regard whether these banks are strong or not simply because the government is guaranteeing them. And eventually if these banks fail, then the government will have to shoulder the losses,” he said.
He said that the willingness of customers to shoulder additional insurance fees as a result of the proposal should also be considered.
“Definitely any insurance has a fee to be covered and that cost of insuring may have to be passed on to the depositors as well,” Coronel said.
Once the proposal is implemented, a depositor who has saved P1 million, for example, is guaranteed to still receive the whole amount should the bank close down. In the present set-up, a depositor can only claim PDIC’s insurance limit of P250,000.
The PDIC said about 91 percent of depositors in the Philippines have only P100,000 or less in their bank accounts. Five percent have around P250,000 and just about four percent have P1 million and higher.
